1031 Exchange On Vacation Homes
Guidelines for taxpayers that wish to do a 1031 exchange involving a vacation home have recently been clarified by the IRS. Historically, the accounting term “1031 exchange” defined that group of real estate investments as property held for investment or used in a trade or business.
Until just recently, there existed no guidance from the IRS indicating whether vacation homes were investment or personal use property. That changed when the U.S. Tax Court disallowed a taxpayer’s exchange from one vacation home into another.
The ruling was released as a Revenue Procedure, which is a type of “cook book” ruling, describing what a taxpayer must do to achieve a certain result from the IRS.
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